WEF Kigali: Rwanda finmin targets double digit growth

WEF Kigali: Rwanda finmin targets double digit growth

For several days every March, Rwanda’s political elite abandon their capital, trading restless Kigali for the government’s annual retreat. Held in the eastern district of Gabiro, the getaway offers a change of scenery, clean rural air – and opportunities for political powerbroking.

But this is no holiday camp for over-worked ministers. As befitting the location – the Rwandan Defence Forces combat training centre – ministers are grilled on their annual targets, judged on their performance, and exhorted to do better – all under the watchful eye of President Paul Kagame.

Yet if his early exit from the retreat to attend a Kigali conference is anything to go by, finance minister Claver Gatete has little to worry about. While other ministers labour to justify their performances, Gatete has only to point to the figures. The IMF says that Rwanda grew by a robust 6.9% in 2015, even against the backdrop of slowing African growth and tumbling commodity prices.

For many observers, the policy choices taken by Gatete in this tiny, landlocked nation have forged an investor-friendly economic model that underpins Rwanda’s emergence. Yet despite the praise heaped on the mild-mannered former Central Bank chief, questions remain over whether a country of just 12m can aspire to anything more than fleeting, regional success. Speaking to African Business in Kigali, Gatete insists that Rwanda’s economic model is more than a flash in the pan – and will continue to transform the country’s prospects.

“What we are planning is how to move growth from 7% to double digits, that’s what we’re looking at. We’ll be discussing the plans, where we are and what we need to do,” he says optimistically.

For that ambition to become reality, there is a widespread acknowledgement – shared by Gatete – that the country will have to look beyond its traditional economic drivers. Away from rapidly developing Kigali, Rwanda continues to hum to the gentle rhythms of rural life, with agriculture, mostly subsistence, accounting for around a third of GDP. The agricultural population is estimated at some 80% of the total.

Urged on by the multilateral institutions that inform and approve of his policy choices, Gatete has launched a programme of economic diversification in a bid to end Rwanda’s historic overreliance on agriculture and the extraction of minerals – an area hit hard by the global commodities slump.

“What we do here is two things – diversify so we are not relying on minerals, so that we are creating new areas that are going to support exports. At the same time, we are working with areas such as textiles which can be produced here in Rwanda to help us with import substitution. We are also working on value addition for minerals so it’s not the primary commodity that is exported,” he says.

The early signs of this transformation are encouraging. The IMF says that 2015’s impressive growth was underpinned by robust activity in construction and services, with agriculture and manufacturing also delivering sharp performances.

To build on this momentum, says Gatete, the government must attract ever more foreign partners to the country. Net FDI flows into Rwanda increased from $106m in 2011 to almost $292m in 2014, according to the World Bank, as the government set about burnishing its market-friendly credentials and incentivising investors. Explaining the government’s investor-first approach, Gatete alights on Rwanda’s cut-flower industry, which he argues is providing a model for government interaction with the private sector.

“We are bringing in a company from Israel that is really doing the implementation but also we are working with a company from the Netherlands that will take the flowers to market … we have put everything in place and we have more land for that. These are examples of where the market was there, but what was needed was the private sector – and the government to provide incentives for them to invest.”

It is this public-private cooperation that sits at the heart of Rwanda’s development model. A plethora of state institutions have sprung up to service the emerging investor class, with the Rwanda Development Board, whose CEO sits in the cabinet, taking a central role in linking investors to decision-making government departments. This holistic approach has drawn favourable comparisons to the 20th century renaissance of Singapore – a former colonial backwater turned regional powerhouse under the transformative leadership of Lee Kuan Yew. Despite the implicit compliment, Gatete blanches when asked whether Rwanda is replicating the “Singapore model”.

“There’s no one model to fit all. Countries are different, the background is different and the starting point is different. You can’t cut and paste. One of the issues really is the top leadership understanding the needs of the people and being ready to take them forward. Once it’s understood at the highest level, it helps with the implementation.”

Gatete points to the government’s introduction of performance contracts as a uniquely Rwandan element in the mix, providing an effective way to judge success and hold errant ministers to account. Yet while the government insists that accountability can be reached through closer monitoring of its representatives, some critics argue that only a more open political system will create the necessary space for an honest critique of government successes and failures.

Such a transformation appears unlikely in the near future given President Kagame’s controversial decision – in defiance of international partners including the United States – to amend the constitution in order to pursue a third term in power.

“It’s the decision of the Rwandans, not the international community. We are looking at how we move forward in a way that can help ourselves rather than depending on outside support … they can support but the primary responsibility belongs to Rwandans,” he says. For the finance minister, it is the stability provided by Kagame’s leadership that has allowed the country to pursue its bold development plans.

Regardless of external criticism, it is a path that the country appears destined to tread well into the future.

“[Kagame] has led the entire process of uniting people, coming up with a vision and a transformation which is inclusive and focuses on people … We have a Vision 2020, we are starting a Vision 2050, and it’s very important to have continuity.”

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